CMO Council: Inadequate Data Access, Metrics Are Impediments

While companies are allocating more of their marketing budgets to personalized communication efforts/campaigns, full leveraging of this capability is being impeded by insufficient infrastructure, access to customer data and assessment metrics.

That's the core picture emerging from a new study by the Chief Marketing Officer (CMO) Council, "The Power of Personalization."

More than 700 B-to-C and B-to-B senior marketing executives and presidents/CEOs worldwide, representing a wide range of industries/businesses, were surveyed about their use of customized content/collateral (both traditional and digital) and personalized Web interaction, and their impacts on marketing effectiveness, customer acquisition, retention and business outcomes. Qualitative interviews were conducted in a second stage of the study, which also identified several winning strategies for personalized communications.

About a third (35%) of survey respondents reported that fewer than 10% of 2007 marketing budgets were dedicated to personalized communications, 22% said the allocation fell between 10% and 20%, and 18% indicated a greater than 20% allocation.

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Asked about 2008 budgets, 30% reported that personalized communications would represent between 10% and 20% of their budgets, and a quarter said they would allocate more than 20% of their budgets to these types of communications. Another 23% said the allocation would be less than 10%, and 22% were still undecided.

However, 44% indicated "low" usage of personalized communications in their customer acquisition and relationship management programs, 39% described their usage as moderate, and just 17% reported a high usage level.

This is despite the fact that nearly a quarter (24%) said their companies had been using personalized communications for more than five years, 19% for three to five years, and 39% for between one and three years. Just 17% said they are still in the planning stages.

Also--and perhaps more important--despite the fact that marketers confirmed that the big needs driving more personalized marketing engagement are increasing retention and loyalty (39%), better use of marketing dollars and heightened ROI (37%) and improving response and close rates (37%), followed by cutting through the clutter of competing messages (33%) and a more strategic focus on optimizing customer lifetime value (29%).

CMOs "clearly recognize a significant ROI upside in personalized communications" as compared with money spent on mass communications, says CMO Council Executive Director Donovan Neale-May, stressing that the council defines personalized communications as going far beyond isolated instances of including some sort of customization in a printed or digital message.

"We're talking about building customer relationship programs that are part of a bigger strategy," he told Marketing Daily. "We're talking about large-scale usage, across multiple channels and multiple formats, with each having different attributes for engaging and actually benefiting the customer. This is not just about gathering customer data in a CRM database; every point of interaction must enhance the customer's experience, or provide a service of some sort."

But nearly half of respondents described the degree of the integration of personalized communications into multimedia, multichannel campaigns at their companies as "low." Another 28% described the integration as moderate, and only 14% as high.

What's standing in the way of such strategies? Asked to name the key challenges in integrating personalized communications into marketing and business development programs, nearly half (49%) cited inadequate systems and infrastructures, 46% cited lack of customer data/insight, 43% cited cost and complexity, and a third (34%) cited limited resources and budgets.

Other obstacles include internal competency/proficiency (27%), privacy and security concerns (21%), management mindset (20%) and "no perceived ROI" (14%). Less than 9% said that adverse customer reaction was a key issue, and 6% blamed lack of progress on not having a trusted supplier/solution provider.

Obviously, many of these factors are intertwined. And much of the problem boils down to marketers' inadequate access to critical customer data, according to Neale-May. Marketers "have a real problem with getting their hands on the customer data" they need to implement effective campaigns, he says. "Companies have all kinds of data-sales, CRM, behavioral, call center, field support and service, and other sources--but they tend to be in siloed repositories. Data 'ownership' is a big issue. The data are not pooled for effective use by marketing."

Indeed, while nearly half (49%) of respondents said that the chief marketing executive should be the company's "champion" of personalized marketing initiatives, 48% also indicated that at least some of the data needed for these is maintained by sales and customer relationship management, 30% by customer service/support and 28% by IT. About 40% indicated that at least some of the data is maintained by marketing and research groups.

And 37% described their companies' customer knowledge as "fair" and 10% as "poor," while 37% said they had good "general" customer knowledge, and only 13% described it as a "comprehensive profile" encompassing demographics, behavioral, psychographic, ethnographic and transactional data.

However, marketers are hopeful on the data scenario: While over a third (35%) said there's room for improvement in their companies' degree of integrating various customer data sources for use in personalized communications, 32% said integration is "getting better all the time," and nearly 22% said sources are integrated either effectively or extremely well.

Also, 34% said that their companies' customer data is "reasonably" reliable/accurate, 31% said it's "getting better all the time," and 10% said it's "extremely good"--versus 22% saying it "needs work" and 3% rating their data deficient.

Companies that lack internal data-mining skills and resources should consider using skilled, reputable outside service providers to enable their marketers to leverage customer data, notes Neale-May.

Another hurdle to personalized strategy implementation: Often, these campaigns are deemed unsuccessful because assessment analytics are inadequate--perpetuating reluctance on management's part to support needed systems and investments, Neale-May points out.

In fact, while 56% of respondents reported that personalized communications used in the past had outperformed traditional mass-market delivery, 38% admitted that they weren't sure.

What metrics are being used? Conversion/close rates (56%), email opening/forwarding rates (45%), Web site traffic and page views (42%) lead, followed by increased customer retention/reduced churn (41%), quality and volume of leads (40%), customer feedback (38%) and campaign yield and business impact (38%).

A rundown of some other key findings and winning strategies:

  • The types of personalized communications being used most, currently, are individualized emails/letters (66%); opt-in, permission-based marketing programs (47%); targeted database marketing leveraging personal profiles (44%); personalized email promotions based on timing of sign-up and at regular intervals thereafter (40%); variable data printing or VDP, used for purposes such as personalized messaged on bills/statements, (32%); print-on-demand collateral incorporating personalized content (31%); personalized care/handling through call/contact centers (27%); personalized URL's/Internet domains (26%); and cookies (25%).
  • The types of personalized communications cited most often as having proved effective are individualized emails and letters (55%); targeted database marketing leveraging personal profiles (35%); opt-in, permission-based marketing programs (30%); personalized care/handling through call/contact centers (24%); VDP (21%); and personalized print-on-demand collateral (18%).
  • Nearly a quarter (22%) indicated that they have tested/evaluated, but not yet "embraced" personalized URL's, while 21% said the same about individualized emails/letters, and 21% about Web site page delivery based on search history.
  • Primary opportunities are viewed as residing in email campaigns (52%), Web site content delivery (39%), loyalty/rewards programs (31%), customer service/support (29%) and continuity communications such as newsletters (23%).
  • Respondents said that the top benefits of personalization include making offers more relevant and meaningful to prospects, building closer relationships with customers, and increasing the company's overall marketing effectiveness.
  • In creating personalized communications initiatives, respondents cited the customer's purchase history as their chief consideration (47%), with value/profitability of relationship and type of customer (individual or business) second and third (42% and 41%, respectively). Length of customer relationship and related purchase activity were each cited by about 40%.
  • The breakdown of personalized marketing activities dedicated to acquiring new customers versus retaining/servicing existing ones was 47% versus 54%.

"The Power of Personalization" research was co-sponsored by Xerox, Pitney Bowes, GMC Software, Valtira and MindFireInc. The Direct Marketing Association and Print on Demand Initiative (PODi) served as fielding partners for the study, along with media partner CRM Magazine. Promotional support was provided by InfoTrends.

The full report can be downloaded at cmocouncil.org.

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